Our thoughts on recent events

No end in sight

Container traffic in the Asia to West Africa trade slumped by 12% in 2016 and early 2017 numbers are even worse.

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It has been a dreadful couple of years for carriers in the Asia to West Africa container trade with volumes down by around one-fifth since 2014. Data from the Container Trades Statistics Ltd. (CTS) shows that southbound container flows into West Africa decreased by 12% in 2016 to 1.2 million teu, following a drop of 10% in 2015 (1.3m teu).

Figure 1: Southbound Asia to West Africa container traffic ('000 teu)

CTS figures for January 2017 do not suggest that trend is going to reverse any time soon. Southbound volumes for the month were down by 18% year-on-year, which has lowered our rolling 12-month average to 95,600 teu/per month, down by 12.5% Y/Y.

Figure 2: 12-month rolling average of southbound Asia to West Africa container traffic

With no immediate expectation of a demand recovery, carriers are trying to restrict the amount of capacity available through missed/void sailings, although the cascade of bigger ships from other trades continues to undermine the effectiveness of that practise. Forward schedules for April indicate that southbound slots will be virtually identical to those in the same month last year.

Figure 3: Southbound Asia to West Africa capacity ('000 teu)

Despite the weak demand picture spot rates along this route made a surprising upturn at the end of last year although some of the momentum dissipated in February. We estimate that average Asia to West Africa rates fell by around 12% month-on-month in February to reside at approximately $1,600 per 40ft container. With ships barely half-full on the southbound voyage it does not seem likely that carriers will be able to arrest the decline in the next few months.

Figure 4: Southbound Asia to West Africa utilisation v rates

Table 1: Asia-West Africa - estimated monthly supply/demand position

Notes: *Based on effective capacity after deductions are made for deadweight and high-cube limitations and then again for out-of-scope cargoes, i.e. those relayed to areas outside the range. Where relevant, operational capacities have also been adjusted for slots allocated to wayport cargoes. Data subject to change Source: Drewry Maritime Research

Our view

There is very little evidence to suggest that the woeful demand story will get appreciably better in 2017.